Should You Spend $3,500 on a Tesla Powerwall?
Here's what you need to know before joining the more than 38,000 other people who have reserved Tesla Motors' (TSLA) newest product.
The Powerwall Costs a Lot More Than $3,500
Elon Musk was happy to announce a $3,500 price tag for the 10 kilowatt-hour energy storage system, but that's hardly the total it will cost you to get one. A battery is direct current and electricity in the U.S. is alternating current, so every battery has to have an inverter, which costs around $4,000 by the time it's installed. SolarCity (SCTY), which has to include an inverter with its solar systems, says it will install a Powerwall for an additional $5,000, but that's only if you're adding solar through them.
So the cost of adding energy storage is really in excess of $7,500 if you want a functioning Powerwall. And keep in mind that 10 kWh is only enough to power the average home for about eight hours. If you really want to leave the grid, you're going to need a lot more than one Powerwall -- even SolarCity says so.
How Are You Going to Pay for That?
The bigger challenge is how you're going to justify a Powerwall financially.
Unlike solar power systems, energy storage isn't creating energy, it's just moving energy consumption from one point in time to another. The reason Musk's sister company SolarCity and other residential solar competitors have been successful in the last few years is that they can offer rooftop solar for zero down and charge customers less than grid prices for energy produced on their roof. The customer saves money and SolarCity makes money, so it's a win-win. This is possible because solar panels produce energy and are compensated for that energy through what's called net metering. A consumer is able to send extra solar electricity generated during the day to the grid and only pay for the net usage they have every month.
But that's where the problems with energy storage begin. With net metering, there's no financial incentive to store the energy you create during the day and use it at night, because you can just send it back to the grid. So, there's no financial justification for an energy storage system.
This could change as rate structures evolve to higher rates during peak hours, but today there's little financial reason to justify buying a Powerwall.
Why You Might Want a Powerwall
There might not be a solid financial reason for most people to own a Powerwall today, but for a small subset of people there are still two good reasons to buy one. The first is if you really want to consume only the energy you produce at home or potentially want to go off-grid. The Powerwall could make both possible, although then you might want to look at the $3,000 7 kWh-cycle product that's designed to be charged and discharged daily. And, as I mentioned above, it'll take a lot more than one Powerwall to go off-grid. Considering the fact that the average U.S. home consumes 30 kWh of electricity a day, you might want nine Powerwalls for three days of backup power to augment solar power, just in case it's cloudy.
The other reason would be to provide backup power in case of emergencies. When a winter storm, hurricane, tornado, or other natural disaster strikes, having the Powerwall fully charged could provide some backup power for your home. But so could a generator, which would likely be lower cost and provide longer-lasting backup power.
Powerwall May Not Be Right for You ... Yet
In today's world, there's not a great reason to have a Powerwall system unless you really want to "go green" or are extremely worried about blackouts. But that doesn't mean there won't be a reason to buy one in the future.
Energy storage companies are reducing costs dramatically, and as they do it'll become far more economical to have backup power in your house. And utilities are changing rate structures in ways that may make it more worthwhile to put solar panels on your roof, a few Powerwalls in your basement, and cut the cord to the grid altogether.
Elon Musk is right; there will be a time when energy storage will be in every home in the country. But that time isn't here yet, and unless you fit into a small category of people, the $3,500 Powerwall probably isn't for you right now.
Motley Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends and owns shares of SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.